Inflation continues to grow

MOSCOW, July 6 (RIA Novosti) - Economic Development and Trade Minister German Gref produced inflation figures for June Tuesday. Unlike some officials had predicted, inflation increased by 0.6%, meaning that consumer prices in the first half of the year have gone up by almost 8%, against 6.1% for the same period last year, the Gazeta daily reported.

The inflation figures make nonsense of the government's annual forecast. When Alexei Ulyukayev, first deputy chairman of the Central Bank, said confidently that January-September inflation was expected at 8% (an annualized 10%), he calculated that the summer months would see deflation. According to Ulyukayev, summer deflation may be triggered by lower prices for vegetables and fruit.

Analysts are very skeptical about the "vegetable" forecasts. "In the abstract, when the harvest is gathered in August, vegetables and fruit always go down in price, but it is naive to expect deflation throughout the entire summer," said Anton Struchenevsky, an economist with the Troika Dialog investment company. "This year, even in August inflation will not be negative; it is unrealistic."

Struchenevsky cited figures for last year, when August's inflation was very high - "and the pace of economic growth slowed disastrously."

The main current contributors to inflation are increasing food prices and rising housing and communal tariffs. The government has told regions to cover 100% of their housing and communal costs by the end of 2005. Currently the figure is about 59%, meaning tariffs keep rising. Besides, only some regions raised their tariffs in January-February, with many planning the move for March, producing a delayed effect on consumer prices in the summer. So even in the months to come inflation will not go down.

The Finance Ministry, the Central Bank and the Economic Development and Trade Ministry have already announced that inflation may go up to 11.5%, down just 0.2% on last year. This is more than an optimistic forecast - experts are predicting 15% by the end of the year.

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